Expiration of Enhanced Federal Tax Credits: What It Means for 2026
Understanding how this policy change could impact your Colorado health insurance costs
Background: Expanded Credits Since 2021
In 2021, federal lawmakers temporarily expanded premium tax credits to make Marketplace coverage more affordable for millions of Americans. These “enhanced credits” allowed more people ,including those earning above 400% of the Federal Poverty Level (FPL) to qualify for financial help.
The adjustment also lowered the affordability threshold from about 8.5% of adjusted gross income (AGI) to roughly 4.5–6%, meaning households contributed a smaller portion of their income toward premiums.
This policy was extended several times, helping keep health insurance costs manageable for middle-income families and individuals across Colorado.
The Change Coming January 1, 2026
Beginning January 1, 2026, the enhanced credits are scheduled to expire unless new federal legislation extends them.
Once they end:
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The affordability threshold will rise back to 9.65% of income, the pre-2021 level.
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Fewer people will qualify for tax credits, particularly those near or above 400% of FPL.
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Those who still qualify will receive smaller monthly credits, resulting in higher out-of-pocket premiums.
The return to the old formula creates what’s known as the “credit cliff.” This is where households just above the qualifying income limit lose all subsidy eligibility. For reference, that threshold is around $62,600 for an individual and $84,600 for a couple — though exact figures may vary based on federal guidelines.
Who Will Feel It Most
The expiration primarily affects:
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Middle-income earners who currently qualify for smaller subsidies due to the enhanced rules.
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Families above 400% FPL, who will lose all tax-credit eligibility.
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Older enrollees who often pay higher base premiums and rely heavily on federal assistance to offset those costs.
Lower-income households under 250% FPL will still have access to standard subsidies and cost-sharing reductions, but even they may notice a slight increase in monthly contributions.
The Bigger Picture
According to marketplace projections, thousands of Coloradans could see premium increases if the enhanced credits lapse. Combined with carrier rate increases averaging 28%, many consumers will experience a dual impact: less financial help and higher base premiums.
While these are federal policy changes, the effect will be felt at the local level — from Fort Collins to Pueblo — making Open Enrollment 2026 one of the most critical periods in recent years for reviewing coverage options.
How to Prepare
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Review your 2025 Marketplace plan and note how much of your premium is covered by tax credits today.
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Check your income level relative to the federal poverty line — even a small increase could change your eligibility next year.
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Explore alternatives early, including off-exchange plans or employer coverage if available.
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Work with a licensed broker who can model premium changes under both current and 2026 rules.
White Hat’s Take
We’re licensed brokers, local to Colorado, and here to help you navigate these federal shifts with clarity. Whether you’re worried about losing eligibility or just want to understand your options, we’ll help you plan for the 2026 marketplace changes — no guesswork, just straightforward guidance.